Money & Finance › Commercial real estate lending › Bridge loans: short-term, floating-rate transition financing
Hard-money loans: fast, costly, asset-based private loans
· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Short-term loans from private lenders, sized to the property's equity, that close in days at high rates and fees.
See it on the Money & Finance map →How it works
Lenders are individuals, private funds and pools of trust-deed investors, often arranged by brokers. They lend about 50–70% of current value for 6–36 months, interest-only, at roughly 9–14% plus 2–4 points upfront (recent years). Approval rests on the property and the exit, a sale or refinance, not on tax returns or credit. Loans usually carry a personal guarantee and steep default interest; in default the lender forecloses, in California by trustee's sale. Uses: quick purchases, rescue capital, fix-and-flips.
Why it matters
They close when banks won't, or can't move fast enough, but the cost means they work only as a short bridge to a clear exit.
Think of it like
Like a pawn loan on a building: light paperwork, fast cash, and the collateral is all that matters.
Facts, rules and data
Loan documents, California DRE and DFPI licensing records for private lenders, and lender rate sheets; data are thin because most loans are private.
Debates and risks
How much private 'rescue' lending has propped up distressed buildings since 2023, and how its losses compare with banks', is largely unmeasured.
Connections (2)
▸Hard-money loans: fast, costly, asset-based private loans are the costliest kind of Bridge loans: short-term, floating-rate transition financingFact, law or data
The connection
Both are short, interest-only loans that carry a property to a sale or refinance. Institutional bridge lenders finance a business plan on larger loans at SOFR plus 3–5 points. Hard-money lenders take smaller, quicker, messier deals at roughly 9–14% plus points, relying almost entirely on the property's equity.
When and why
Hard-money lenders are mostly local private lenders and funds; institutional bridge lenders are debt funds and mortgage REITs.
How we know
Lender rate sheets and loan documents, and mortgage REIT filings for institutional bridge terms.
Debates and risks
The line between the two blurs, and data on how private hard-money loans perform are scarce.
▸Hard-money loans: fast, costly, asset-based private loans care little about Credit scores (FICO) and the credit bureausFact, law or data
The connection
A bank checks the borrower's credit score, tax returns and cash flow. A hard-money lender asks mainly whether the property, sold quickly, would repay the loan. So owners with weak credit, a recent default or messy finances can still borrow if they have enough equity and accept the cost.
When and why
In US private real estate lending, where business-purpose loans fall outside most consumer credit rules.
How we know
Lender underwriting guidelines and marketing; consumer rules such as Dodd–Frank's ability-to-repay test do not apply to business-purpose loans.
Debates and risks
How often equity-only lending ends in foreclosure is not systematically tracked.